India's gold imports fell by approximately 70% in May after the government raised the import duty from 6% to 15% [1], [2].
The sharp decline reflects a significant shift in one of the world's largest gold-consuming markets. This drop is driven by a combination of increased costs and a government-led push for austerity, which may fundamentally alter how the nation sources precious metals.
The import duty increase took effect on May 13, 2026 [3]. Following the hike, monthly import volumes dropped from a range of 75 to 100 tonnes to between 25 and 30 tonnes [2]. Other reports indicate a more moderate decline of 39% for the month of May [3].
Officials said the slump was prompted by the higher tariffs and an appeal for austerity from Prime Minister Narendra Modi. The combination of these factors reduced overall demand for gold across the country [2].
While legal imports have crashed, the higher price gap has created incentives for illegal trade. Some reports indicate that grey-market smuggling could exceed 100 metric tons this year [1]. This surge in smuggling puts pressure on banks and refiners who operate within the legal framework.
The volatility in the legal market has also impacted financial instruments. Gold ETFs saw their first outflows in over a year following the duty hike [3].
“India's gold imports fell by approximately 70% in May”
The drastic reduction in legal gold imports suggests that India's demand is highly sensitive to price fluctuations and government messaging. However, the projected rise in smuggling indicates that the duty hike may not be reducing overall consumption so much as shifting it toward unregulated channels, potentially undermining the government's goal of curbing gold reliance.
